Delivering Better Energy
February 2015
SolarCity Job Creation:
The Internet of Solar Things
9000
8000
Estimated Job Growth of Four Leading
Bay Area Companies
7000
6000
5000
4000
3000
2000
1000
0
SolarCity
Twitter
Dropbox
Twilio
*Employee numbers for Twitter, Dropbox and Twilio are estimates based on publically available information and meant to be illustrative
SolarCity Confidential
Slide 2
Solar’s Growth as a Percentage of New Generation Has
Profound Implications for Future Total Generation
Percent of New U.S. Electricity Generation Capacity That Is
Solar
60%
50%
40%
30%
20%
10%
0%
2009
2010
2011
2012
2013
Q3 2014
SolarCity Confidential
Slide 3
How did we get here?
 Congress sent a strong signal with the ITC
 Expected private capital flows materialized
demanding innovation
 Ratepayer capital complimented
 New electricity production through job creation,
wealth opportunities and macroeconomic growth
(e.g. 174,000 jobs created & 60% CAGR yearon-year)
SolarCity Confidential
Slide 4
Introduction to Solar Project Investments
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Leases/PPAs
MyPower
SolarBonds
Securitizations
SolarCity Confidential
Slide 5
Lease or PPA: High-level Details of Customer
Contracts
 A typical installation sizing:
‒ Residential systems are approximately 4 to 6 kW
‒ Commercial systems range from approximately 50 kW to over 1
MW
 20-year agreement through our SolarLease program or a Power
Purchase Agreement (PPA)
 Customers can save money by going solar
 Flow of project economic benefits commences upon receipt of
Permission to Operate (“PTO”) from the local utility and the start of
solar electricity generation (i.e. the project is “Placed-In-Service”)
SolarCity Confidential
Slide 6
How Customers Benefit from a PPA/Lease Contract
Reduced
Electricity Costs
No Upfront
Payment (1)
Predictable
Rates
Simple and
Worry Free
The customer’s new utility bill plus PPA/Lease payment to
SolarCity is structured to provide a discount to the customer’s
original utility bill.
SolarCity and its investment partners can efficiently utilize the
federal tax credits, state incentives, and depreciation benefits to
fund 100% of the PV system. The customer receives an
affordable energy price without requiring any upfront investment
Through the PPA or Lease contract, customers can set their
solar rates for the next 20 years.
SolarCity installs, monitors, and maintains the PV system at the
customer host site freeing the customer from ownership
obligations.
(1) Customers also have the ability to elect full and partial pre-pay financing options
SolarCity Confidential
Slide 7
Economic Benefits of Investments in Distributed Solar
Distributed solar energy systems provide four primary economic benefits:
Investment Tax
Credit (“ITC”)
• The ITC incentivizes private investment in renewable energy generation capacity
• Allows for a tax credit equal to 30% of the eligible basis of distributed solar energy
installations placed-in-service on or before December 31, 2016
Depreciation
• Distributed solar energy systems are eligible to claim accelerated depreciation (MACRS)
benefits over a five year period
• Depreciable basis of property must also be reduced by 50% of claimed ITC, resulting in a
depreciable basis of 85% of the system’s appraised value
Local
Incentives
• Incentives are provided by certain utilities or states to encourage local renewable energy
development
• Includes upfront rebates, Production Based Incentives (PBIs), Renewable Energy
Certificates (RECs) and state tax credits
Customer
Payments
• Credit-worthy customers execute long-term lease and power purchase agreements (PPAs)
creating stable, contracted cash flows
• Agreements typically have 20 year terms with customer payment options ranging from zero
down payment to full prepayment
SolarCity Confidential
Slide 8
Strong Value From Long-Term, Predictable Benefits
Benefits of solar ownership are derived from following sources:
ITC
30% Investment Tax Credit
Renewable Energy Credits, State
Rebates
Local Incentives
Depreciation
Accelerated (MACRS) Depreciation
Contracted Customer
Payments
1
3
5
7
9
11
13
Contracted monthly payments
escalating 1 – 3% annually
15
17
19
Investment Year
(1)
(2)
Includes only benefits associated with the 20 years of contracted customer payments
Cash or MyPower deals assume customer has sufficient tax liability in first 12 months to take full ITC
SolarCity Confidential
Slide 9
Low Credit Risk on Long-Term Cash Flow
2.5%
Low default rates compared to
established asset classes
Cumulative Net Loss Rate1
2.0%
Default rates for our household
energy payments are
historically lower than for
residential mortgage payments

Long-term contracts offer high
visibility and predictability of
cash flow

Broad range of customers
provides portfolio diversification

Price escalators in many
contracts offer an inflation
hedge
1.5%
1.0%
0.5%
0.0%
Year 1
1)

Year 2
Year 3
Year 4
Net loss rates represents the net loss rates 1,2, 3, and 4 years from the original origination date of asset backed security averaged across 1999 to 2011 for auto loans, 2003 to 2012 for prime residential mortgages, and
2008 – 2012 for SolarCity data. Time periods for auto loans and prime residential mortgages selected to normalize for outlier effects of financial crisis. Auto loan and prime residential data sources: A) Auto loans Average cumulative auto loan losses rates reported by Ally, BMW, Chrysler, Ford, Honda, Hyundai, Nissan, USAA, World Omni and Wachovia which are publicly reported by or on the respective companies’ website or
in company issued reports; B) Residential mortgages – Sequoia Mortgage Trust (http://www.sequoia-reports.com).
SolarCity Confidential
Slide 10
Current Solar Ownership Environment
 Poor customer experience in loans to date has resulted in low solar ownership
‒ Financing from traditional sources are inefficient
‒ Cumbersome approval process
‒ Short term relative to asset life
‒ Higher Annual Percentage Rate (7-10%)
‒ Home is often pledged as collateral
‒ O&M and servicing onus on the customer
‒ Inverter replacement costs
‒ Production uncertainty risks
‒ Monthly loan payments offer minimal savings
‒ Result:
‒ Long return on investment for customer
‒ Poor customer experience
SolarCity Confidential
Slide 11
MyPower – Great customer experience
Pay off your loan with the sun

Pay back your loan based on production

Payments below grid cost of power

30-year warranty and production guarantee
Best solar loan in market

Low interest rate compared to other solar
loans

Loan secured by system not home
Retain benefits of ownership

No prepayment penalties

You control your cost of energy – any
prepayment (>$500) can reamortize loan

Easily rolled into refinance or sale of home
SolarCity Confidential
Slide 12
MyPower Summary
 Launched October 2014 in 8 markets
 First solar loan of its kind
‒ Only loan product from an integrated solar provider
‒ Only loan to offer customers a competitive Annual Percentage Rate (4.5-5%)
‒ Only loan with a 30 year term and matching warranty
 Same high-quality payment structure as PPA/Lease products
 Over 8,000 customers have already signed contracts for MyPower
‒ On target to be 30 – 40% of SolarCity’s volume going forward
 Customer-owned solar expected to be a larger segment of solar
installations
SolarCity Confidential
Slide 13
SolarCity Confidential
Slide 14
Solar Bonds are debt securities issued by SolarCity. As with any investment,
purchasing Solar Bonds involves risk. You must make your own decision about
whether and how much to invest in Solar Bonds. SolarCity cannot make any
investment recommendations or otherwise provide any investment advice. Solar
Bonds are not FDIC-insured. Your earnings and principal are not guaranteed.
SolarCity has filed a registration statement (including a prospectus) with the
Securities and Exchange Commission (“SEC”) for offerings to which information on
in this presentation relates. Before you invest, you should read the prospectus in
that registration statement and other documents SolarCity has filed with the SEC
for more complete information about SolarCity and the offerings. You may obtain
these documents for free by visiting EDGAR on the SEC web site at www.sec.gov.
Alternatively, you may obtain the prospectus relating to the Solar Bonds, and the
pricing supplement relating to a particular series of Solar Bonds, at
solarbonds.solarcity.com.
SolarCity Confidential
Slide 15
SolarCity Solar Bonds
• Nation’s first registered public offering of solar bonds
• Corporate bonds issued by SolarCity
•
•
•
•
•
Earnings paid in part by payments received from thousands of solar
power systems we’ve installed
Maturities from 1 year to 7 years
Interest rates from 2% - 4%
$1,000 minimum purchase
Currently unrated
• Available online from SolarCity, without investment fees
•
•
•
•
solarbonds.solarcity.com
Not limited to accredited investors
$40 million initial offering
Issued continuously
SolarCity Confidential
Slide 16
Solar Bonds are debt securities issued by SolarCity. As with any investment, purchasing Solar Bonds involves risk. You must make your own decision about whether
and how much to invest in Solar Bonds. SolarCity cannot make any investment recommendations or otherwise provide any investment advice. Solar Bonds are not
FDIC-insured. Your earnings and principal are not guaranteed.
SolarCity has filed a registration statement (including a prospectus) with the Securities and Exchange Commission (“SEC”) for offerings to which information on this web
site relates. Before you invest, you should read the prospectus in that registration statement and other documents SolarCity has filed with the SEC for more complete
information about SolarCity and the offerings. You may obtain these documents for free by visiting EDGAR on the SEC web site atwww.sec.gov. Alternatively, you may
obtain the prospectus relating to the Solar Bonds, and the pricing supplement relating to a particular series of Solar Bonds, on this website.
SolarCity Confidential
Slide 17
A New Investment Option
SolarCity Confidential
Slide 18
SolarCity Confidential
Slide 19
Securitizations
 Transaction Highlights: Three to date
 High Quality Cashflows (Energy Payments) That Are Consistent and Predictable
‒
Historical utility data demonstrates that customers consistently make their energy
payments with minimal defaults
‒
Host Customers in the portfolio are economically incentivized to make monthly
energy payments to SolarCity
 Strong Collateral Pool Ranks Among the Highest Credit Quality ABS Portfolios
‒
Highly creditworthy Residential Host Customers in the utility rate-paying base
‒
Commercial/Government Host Customers are primarily investment grade rated
‒
87.6% of these Solar Assets are comprised of assets that have an underlying
credit rating of “A” or higher
 Diversified portfolio across utility district, county, state, equipment manufacturer and
Host Customers
SolarCity Confidential
Slide 20
Thank You
888.SOL.CITY | 888.765.2489 | SOLARCITY.COM
SolarCity Confidential
Slide 21
APPENDIX – CONSUMER PROTECTION STATUTES
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Equal Credit Opportunity Act
Consumer Leasing Act
Electronic Funds Transfers Act
Fair Debt Collection Practices Act
Fair Credit Reporting Act
Truth in Lending Act
Servicemembers Civil Relief Act
Electronic Signatures Act
Right to Financial Privacy Act
CAN-SPAM Act
Uniform Commercial Code
Federal Trade Commission Act
OSHA Law and Regulations
Telephone Consumer Protection Act
Federal Magnuson-Moss Warranty Act
Unfair, Deceptive or Abusive Acts or Practices
SolarCity Confidential
Slide 22
APPENDIX – CONSUMER PROTECTION
STATUTES
 Equal Credit Opportunity Act (“ECOA”)
a. The ECOA prohibits any creditor from discriminating against any
applicant, in any aspect of a credit transaction, on the basis of race,
color, religion, national origin, sex, marital status, or age.
b. Creditors cannot extend less favorable terms, discourage application, or
otherwise disparately treat individuals on account of any of the factors
above.
c. Special notices for each borrower upon adverse action, i.e., rejection of
loan application.
d. Limitations on types of personal questions can ask in connection with
application.
e. Enforcers: US DOJ, CFPB, FTC, and private plaintiffs.
SolarCity Confidential
Slide 23
APPENDIX – CONSUMER PROTECTION
STATUTES
 Consumer Leasing Act (“CLA”)
a. The CLA requires that certain personal leases clearly disclose costs and
terms, imposes limitations on late fees, and requires clear disclosures in
lease advertising.
b. The CLA protects consumers from hidden fees, overly complex financial
terms, and disproportionate penalties upon default.
c. Enforcers: FTC, CFPB, US DOJ, and private plaintiffs
SolarCity Confidential
Slide 24
APPENDIX – CONSUMER PROTECTION
STATUTES
 Electronic Funds Transfers Act (“EFTA”)
a. The EFTA protects individual consumers engaging in electronic funds
transfers.
b. It requires 1) disclosure of the terms and conditions at contract execution,
2) that institutions establish procedures for correcting electronic fund
transfer errors, 3) and limits on consumer liability for unauthorized
transfers.
c. It also prohibits creditors from requiring that electronic funds transfers be
used, and requires prior consent.
d. Enforcers: FTC, CFPB, US DOJ, and private plaintiffs
SolarCity Confidential
Slide 25
APPENDIX – CONSUMER PROTECTION
STATUTES
 Fair Debt Collection Practices Act (“FDCPA”)
a. The FDCPA protects consumers from deceptive, unfair, and abusive debt
collection practices.
b. Debt collectors cannot collect fees unless they are expressly authorized
by contract, fail to credit or post payments, take property without legal
right, misrepresent the status of the debt, or engage in a host of other
abusive behaviors.
c. Enforcers: FTC, CFPB, US DOJ, private plaintiffs.
SolarCity Confidential
Slide 26
APPENDIX – CONSUMER PROTECTION
STATUTES
 Fair Credit Reporting Act (“FCRA”)
a. The FCRA regulates how companies report consumer debts, use
consumer information, and access sensitive credit information. It also
requires certain corrective action upon learning that a consumer’s identity
may have been stolen.
b. FCRA restricts when and how a company can share confidential
consumer information, when and what disclosures are required, and the
consequences of failing to adequately protect consumer information.
c. Enforcers: FTC, CFPB, US DOJ, private plaintiffs.
SolarCity Confidential
Slide 27
APPENDIX – CONSUMER PROTECTION
STATUTES
 Truth In Lending Act (“TILA”)
a. TILA requires accurate and standardized disclosures of costs, fees, rates
and certain loan terms in consumer debts.
b. TILA requires disclosure of and a standardized method of describing the
Finance Chart and the Annual Percentage Rate so as to minimize
confusion by consumers.
c. TILA also regulates advertising.
d. Enforcers: FTC, CFPB, US DOJ, private plaintiffs.
SolarCity Confidential
Slide 28
APPENDIX – CONSUMER PROTECTION
STATUTES
 Servicemembers Civil Relief Act (“SCRA”)
a. The SCRA is protects members of the armed forces while on active duty.
b. While deployed, service members may not be charged more than 6%
interest on any loans they accrued prior to deployment.
c. The SCRA prohibits creditors from many adverse actions against service
members while on active duty, including taking a default judgment,
proceeding with foreclosure, or terminating leases.
d. Enforcers: FTC, CFPB, US DOJ, private plaintiffs.
SolarCity Confidential
Slide 29
APPENDIX – CONSUMER PROTECTION
STATUTES
 Electronic Signatures Act (“E-Sign Act”)
a. The E-Sign Act regulates how companies and consumers use electronic
signatures rather than handwritten ones.
b. The Act requires that both parties to such a transaction agree to
electronic signature.
c. The Act protects customers by requiring affirmative consent, clear and
conspicuous disclosure of the terms, and description of necessary
hardware.
d. Enforcers: Private plaintiffs.
SolarCity Confidential
Slide 30
APPENDIX – CONSUMER PROTECTION
STATUTES
 Right to Financial Privacy Act (“RFPA”)
a. The RFPA establishes that customers have a right to expect that their
financial activities will be kept private from federal governmental scrutiny.
b. It establishes procedures that the government must follow when seeking
consumer’s financial records.
c. It also places duties on the disclosing entity including a written notice, an
explanation, and the procedure for objecting.
d. Enforcers: Private plaintiffs.
SolarCity Confidential
Slide 31
APPENDIX – CONSUMER PROTECTION
STATUTES
 CAN-SPAM Act
a. The CAN-SPAM Act sets out a host of limitations on commercial email.
b. The Act requires that the sender clearly identify themselves, state that the
email is an advertisement, accurately describe the contents of the email,
and provide an opt-out method.
c. Violations are punishable by fines of up to $16,000 per offending email.
d. Enforcers: FTC, CFPB, US DOJ.
SolarCity Confidential
Slide 32
APPENDIX – CONSUMER PROTECTION
STATUTES
 Uniform Commercial Code (“UCC”)
a. The UCC sets out uniform rules governing sales, leases and commercial
transactions in all 50 states of the United States.
b. While the UCC is not a consumer-protection statute, UCC promotes fair
and predictable commercial practices in any jurisdiction.
c. The UCC limits how a solar contract may impair the free transfer of real
property.
d. Enforcers: private plaintiffs.
SolarCity Confidential
Slide 33
APPENDIX – CONSUMER PROTECTION
STATUTES
 Federal Trade Commission Act (“FTCA”)
a. The FTCA empowers the Fair Trade Commission to 1) prevent unfair or
deceptive methods of competition, 2) seek money to address wrongdoing
to consumers, 3) prescribe trade regulation rules, 4) conduct
investigations, and 5) make reports to congress.
b. The FTC publishes “Green Guides” that limits what marketers can claim
about the environmental attributes of a product.
c. Enforcers: FTC.
SolarCity Confidential
Slide 34
APPENDIX – CONSUMER PROTECTION
STATUTES
 OSHA Law and Regulations
a. OSHA’s mission is to assure safe and healthful working conditions by
setting and enforcing standards and by providing training, outreach,
education and assistance.
b. OSHA regulations include limits on chemical exposure, mandatory
employee access to information, personal protective equipment, and
safety procedures.
c. Enforcers: OSHA and private plaintiffs.
SolarCity Confidential
Slide 35
APPENDIX – CONSUMER PROTECTION
STATUTES
 Telephone Consumer Protection Act
a. The TCPA restricts the use of automated or prerecorded telephone
equipment to make telephone calls.
b. If a consumer withdraws or does not give consent to be autodialed, the
institution may only contact the consumer with manually dialed calls.
c. Under the TCPA, the FCC has created the Do-Not-Call List. Once a
consumer puts registers their name and phone number, they are
protected from telephone solicitations.
d. Enforcers: FTC, CFPB, FCC, US DOJ, and private plaintiffs.
SolarCity Confidential
Slide 36
APPENDIX – CONSUMER PROTECTION
STATUTES
 Federal Magnuson-Moss Warranty Act (“MMWA”)
a. The MMWA requires that manufactures and sellers of consumer products
disclose detailed, standardized information about warranty coverage.
b. These disclosures let consumers know what they are buying and what to
expect if something goes wrong.
c. The MMWA encourages businesses to address consumer complaints in a
timely and satisfactory way.
d. Enforcers: FTC, CFPB, US DOJ, and private plaintiffs.
SolarCity Confidential
Slide 37
APPENDIX – CONSUMER PROTECTION
STATUTES
 Unfair, Deceptive or Abusive Acts or Practices (“UDAAP”)
a. UDAAP covers all aspects of the relationship with consumers, including
marketing, disclosures, terms, underwriting, options, closings, ancillary
products, fees, complaint resolution, servicing, and default, and prohibits
unfair, deceptive or abusive acts or practices.
b. Each employee is expected to comply with UDAAP at all times.
c. Enforcers: CFPB, FTC, private plaintiffs, and states.
SolarCity Confidential
Slide 38